Small airport privatisation gets on the fast lane after Modi govt relaxes rules

An aircraft takes off at Indira Gandhi International Airport in Delhi | Prashanth Vishwanathan/Bloomberg

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Many key foreign and domestic players are willing to invest in upgradation of 6 airports, including Jaipur, Ahmedabad and Lucknow.

New Delhi: The privatisation exercise of airports in India finally seems to be picking up after a gap of 12 years, when the Delhi and Mumbai airports were successfully upgraded, largely due to relaxation in norms.

Several foreign and domestic players are willing to invest big money in the upgradation process of six small airports located in Jaipur, Ahmedabad, Lucknow, Thiruvananthapuram, Mangaluru and Guwahati.

In November 2018, the government had approved privatisation of these airports. While the deadline for bidding is 14 February, the letter of award will be issued on 28 February.

“There are many players willing to participate this time unlike last few times… a clear picture will emerge only after the bidding process is over but the norms this time have been relaxed which makes it lucrative for companies to look for participating in the bidding process,” a senior government official, who did not wish to be named, told The Print.

Sources said that Hyderabad-based conglomerate GVK, GMR Group, Anil Ambani-run Reliance Infrastructure and Adani Group have shown interest in participating in the bidding process.

GVK, through its GVK Airport Holding, owns 50.5% in Mumbai International Airport Ltd (MIAL), and the GMR Group owns and operates Delhi airport.

A Mint report also said that among global players, German airport operator AviAlliance, US financial investor Global Infrastructure Partners (GIP) and Sydney-based investment manager AMP Capital have also evinced interest.

ThePrint asked Changi Airports International (CAI) if it would be participating in the bidding process.

“As a global airport investor, manager and consultant, Changi Airports International continuously evaluates opportunities in airport projects where we can add value and where there is a strong fit with our global strategy,” See Ngee Muoy, spokesperson of CAI, told ThePrint in an email.

The new norms

To attract more investors, the Airports Authority of India (AAI) has decided to award a concession period — a long-term right to use all assets and earn revenue from customers — of 50 years instead of 30 years to the concessionaires.

Upgradation and privatisation of airports had lost steam in the last decade with the AAI trying to privatise only limited areas of selected airports, and cutting down the concession period from 30 years to 15.

“This has been a huge dampener and the last few attempts to privatise airports were deflated. Besides, a 15-year concession period was too less for any company to generate revenue,” a senior executive, who is working in one of the Indian companies that plans to bid, said, not wishing to be named.

The concessionaires will be given the responsibility to manage, design and develop all airport assets, as well to develop additional air-side, terminal, city-side and land-side infrastructure.

Instead of following the revenue-sharing model, the bidder offering the highest monthly per-passenger fee to the AAI will be declared the winner.

While earlier there were attempts to follow the public-private partnership (PPP) model to develop the airports at Kolkata, Chennai, Ahmedabad and Jaipur, the former two metros eventually moved to the management contract model.

Success of PPP model

Minister of State for Civil Aviation Jayant Sinha had earlier said that affordability of private airports, without any compromise on the return on investment for their developers, would be the key while carrying out the upgradation exercise.

An official statement also said that the PPP experiments have helped in creation of world-class airports. The model has also helped the AAI in enhancing its revenues and focusing on developing airports and air navigation infrastructure in the country.